A zero-hours contract is not, itself, recognised in law. However, given the recent press coverage, employers are well advised to understand what rights zero-hours contracts give to both employers and workers, especially because individuals who are ostensibly engaged on zero-hours contracts are increasingly seeking to assert their actual rights, as well as improve their practical status. It is therefore important for employers to review the use of zero-hours contracts and ensure they are being used correctly and lawfully. A review of the status of this group of staff at this stage could avoid future liabilities as well as provide an opportunity to assess whether the use of this type of contract is still appropriate for the work actually being done.

Typically, a worker (the majority of people on zero-hours contracts are likely to be workers rather than employees) will have a contract under which they agree to be available for work as and when the employer requires but the employer does not wish to guarantee the number of hours' work, nor set the times of the work to be done in advance. The majority of employers use zero-hour contracts to avoid paying fixed overheads, not to avoid giving employees employment protection. The worker is also not generally obliged to accept the work which is offered when it is offered.

Zero-hours contracts were therefore born to fill a gap to provide a pool or bank of staff who could fill short term fluctuating demands for an employer with staff who were flexible and could chose to work around other commitments. As there is no obligation on the employer to offer work, nor on the employee to accept it, staff on zero-hours contracts do not typically have employee status. The use of zero-hours contracts in this context is perfectly lawful (for the moment).

Although the zero-hours label is a factor to consider, it is not conclusive as to the rights the worker will have. As such, it is important to periodically review the use of such contracts. This is because, if an individual is as a matter of fact considered to be an employee, it doesn’t matter that the parties call the contract a zero-hours contract in an attempt to avoid employment liabilities.

When reviewing the contract, consider whether it expressly states that there is no mutuality of obligation, ie that the employer has no obligation to offer any work and the employee has no obligation to accept any work offered. If it does not include this express term, employers should consider introducing this wording into the written contract.

If the written contract does include such wording, employers should also consider how the contract actually works in practice on a day to day and week to week basis. If the employer expects the employee to turn up to work at a particular time or on a particular day, the contract is probably still an employer-employee contract. Where the contract is truly an employer-employee relationship, a zero-hours employee still has the same employment rights as other employees no matter what the document says, or what it is called.

If the written terms do not include an obligation to provide work or for staff to do it, employers should then consider whether the staff are still workers engaged under "any other contract, whether express or implied …. whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual" which will make the individual a 'worker'. Many zero-hours staff will fit this category and, if they do, the worker is still entitled to be paid the national minimum wage for the hours which they work, as well as being entitled to paid holiday and rest breaks under the Working Time Regulations.